Shell moves closer to Kitimat LNG terminal

Royal Dutch Shell says it has given a tentative go ahead for a liquefied natural gas project in Kitimat, B.C., alongside three Asian Partners.

The Anglo-Dutch energy giant says it will have a 40-per-cent stake in the project, called LNG Canada.

PetroChina, Mitsubishi Corp. and Korea Gas Corp. will each hold a 20-per-cent interest.

Liquefied natural gas, or LNG, is gas that has been chilled into a liquid state, making it easier to transport to overseas markets by tanker.

Demand for the fuel is voracious in Asia, where natural gas fetches a price several times higher than it does in the oversupplied North American market.

North America experiencing a glut of gas

New technology for exploiting previously inaccessible shale formations has contributed to a glut of natural gas in North America, pushing the price down to decade lows.

Natural gas was trading Tuesday up seven cents at 2.50 US per million British Thermal Units.

Shell says LNG Canada will initially have two production units each producing six million tonnes of LNG per year.

The partners will make a final decision on whether to move ahead with the project after conducting engineering work and environmental assessments, as well as consultations with local communities and other stakeholders.

With regulatory approval, start-up could come around the end of the decade.

Shell’s would be only one of several LNG terminals proposed for the northwestern B.C. port.

Calgary-based Encana and U.S. partners Apache Corp. and EOG Resources are considering building their own project.

Another proposal called BC LNG, owned by the Haisla First Nation and Houston-based LNG Partners, expects its first shipment in 2014.

And Talisman Energy Inc., Nexen Inc. and Imperial Oil Ltd. have been weighing potential projects of their own.

And Kitimat is also proposed as the western end of Enbridge’s planned $5.5-billion dollar Northern Gateway Pipeline to carry oilsands crude from Edmonton, something that has been opposed by environmentalists and First Nations groups at ongoing public hearings.